Taiwan's leading fund houses are making available the first ETFs providing exposure to developed market equities.
The first fruits of the product expansion approved by the Taiwanese regulator will be inverse and leveraged products tracking the S&P500 and Japan’s TOPIX.
Taiwan's Financial Supervisory Commission (FSC) approved a new set of inverse and leveraged ETFs by Fubon Securities (Fubon SITC) on July 16, including two sub-funds - the Daily TOPIX Index Bull 2x ETF and the Daily TOPIX Bear 1x ETF.
Fubon SITC plans to raise money between August 19-24 and to list in September.
Meanwhile Yuanta Funds, Taiwan’s biggest ETF manager, received the green light from the FSC last Friday for another set of inverse and leveraged ETFs which track the S&P500 index.
Presently, Taiwan has nine ETFs tracking overseas equities, but these are limited in scope to Hong Kong and China equities.
Taiwan’s regulator and the local bourse aim to expand the ETF universe still further. “We hope to offer funds which track Southeast Asia or ASEAN markets, allowing investors low-cost vehicles to participate overseas market and to diversify their investments,” said Eric Chen, senior vice president of corporate planning at the Taiwan Stock Exchange.
Taiwan joined Korea and Japan in offering inverse and leveraged ETFs in October last year. Since then, six funds have raised a total of TW$60.3 billion ($1.9 billion) in assets, as of last Friday. The two key players for such exotic products are Yuanta and Fubon.
Regulators’ attempts at boosting the level of ETF trading have so far proved effective, with good reaction from the market. In all, trading volume of the 30-listed ETFs in the first half amounted TW$660 billion, representing 5.85% of the market turnover, and surpassing the ETF total turnover of TW$433 billion recorded in 2014, according to TWSE.
Taiwanese managers also see a larger room for such product development in competition with offshore mangers in fund sales. “ETFs’ growth needs more market participation after listing, but not channel distribution,” said Henry Lin, chairman of Securities Investment trust and Consulting Association (Sitca). He added Taiwanese managers find their advantage in ETF space because it is a more localized business requires promotion and liquidity in partnership with brokers.
Julian Liu, president and CEO at Yuanta, said exotic products like those tracking A-share would be a niche for Taiwan managers. “There will be no difference [between Chinese and Taiwanese managers] in offering plain-vanilla products, we don’t even have quotas in RQFII (renminbi qualified foreign institutional investors scheme), but our leveraged/inverse ETF will be something to differentiate with competitors.”